Stocks Rally Amid Strength In The Financial Sector - U.S. Commentary

By IBT Staff Reporter On 07/13/09 AT 4:50 PM

RTTNews - After showing a lack of direction in early trading on Monday, stocks rallied amid some positive analyst comments on the financial sector. The major averages finished in positive territory by substantial margins, staging their strongest performance of the month.

Financial stocks led the way higher on the heels of positive comments from Meredith Whitney, who raised her rating on Goldman Sachs (GS) to Buy from Neutral. Whitney also said Bank of America (BAC) could provide value for investors.

On the earnings front, railroad operator CSX Corp. (CSX) is reported second quarter earnings after the close of trading, reporting earnings of $0.78 per share compared to $0.93 per share last year. Excluding the impact of discontinued operations, the company earned $0.72 per share.

Meanwhile, Novellus Systems (NVLS) reported an adjusted second-quarter loss of $39.3 million or $0.41 per share versus net income of $6.2 million or $0.06 per share in the year ago quarter. Wall Street analysts expected the company to report a loss of $0.38 per share for the quarter.

The major averages saw some further upside going into the close, ending the session at their best levels of the day. The Dow closed up by 185.16 points or 2.3 percent at 8,331.68, the Nasdaq moved up by 37.18 points or 2.1 percent to 1,793.21 and the S&P 500 rose by 21.92 points or 2.5 percent to 901.05.

Sector News

Financial stocks turned in some of the day's best performances, as reflected by the 6.5 percent gain posted by Kbw Banking Index. With the surge, the index moved further off a two-month closing low set last week, reaching its best closing level in two weeks.

Commercial real estate stocks also moved higher by notable margins, with the Morgan Stanley Real Estate Index rising by 4.5 percent on the day. The day's gain helped the index move off of its worst closing price in over two months set last Friday.

Brokerage stocks also saw a strong outing, resulting in a 3.5 percent gain by the NYSE Arca Securities Broker/Dealer Index. With the climb, the index was able to move further off of a nearly two-month closing low set last Wednesday.

Defense stocks also jumped, with the Philadelphia Defense Sector Index carving out a 2.8 percent gain. The index was able to move off of a nearly three-month closing low set on Friday.

All of the Dow components ended the session in positive territory, contributing to the triple-digit gain posted by the blue chip index.

Financial stocks led the Dow higher, with Bank of America (BAC) posting a gain of 13.6 percent on the day, finishing at its best price in nearly two weeks.

Further, JP Morgan Chase (JPM) advanced by 7.3 percent, reaching its best closing level in over three weeks. The surge also helped to propel the stock away from Friday's closing level, which tested a two-month low.

Further, shares of credit card giant American Express (AXP) experienced a notable move to the upside, rising by 5.6 percent. The advance helped the stock to finish at its best level in roughly three weeks.

General Electric (GE) also rose, posting a gain of 6.3 percent. Shares of the diversified conglomerate continued their recovery from a three-month low reached last Wednesday.

Shares of Caterpillar (CAT), Pfizer (PFE) and Microsoft (MSFT) all turned in notably strong performances, continuing their climb away from their recent lows.

Meanwhile, the major European markets closed firmly on the upside, with the German DAX Index and the French CAC 40 Index finishing up by 2.9 percent and 2.3 percent, respectively. The U.K.'s FTSE 100 Index also rose, posting a gain of 1.7 percent.

In the bond markets, treasuries weakened by a notable margin following the release of the Treasury Department's budget data. Subsequently, the yield on the benchmark ten-year note closed at 3.346 percent, rising by 5.1 basis points on the day.

Looking Ahead

Earnings figures are likely to be in focus on Tuesday, as traders will be reacting to the results from CSX Corp. and Novellus while also looking to reports from financial giant Goldman Sachs and conglomerate Johnson and Johnson (JNJ).

The focus of the broader markets is likely to turn to two key economic reports due to be released before the start of trading. Traders will be presented with producer price data for June from the Labor Department, with the headline figure expected to tick up 1.0 percent after rising by 0.2 percent in May.

Further, the Commerce Department will release retail sales figures for June, with analysts expecting a 0.4 percent increase compared to the 0.5 percent growth seen in the previous month.